New Target Price for SoFi After Latest Student Loan Forgiveness Ruling
Growth names are taking a beating in this market but I'm buying more of the financial services name after a close look at the chart.
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With the exception of a sell-off into earnings and a sharp rally, and then a sell-off and then another rally, the shares of SoFi Technologies SOFI have more or less traded sideways for almost three months.
What gives? Letting the moving averages catch up? Are there new technical developments that the charts show? I've been adding to my long position of late, including on Thursday with all of my growth names are being slapped around like some kind of thief in the night. You've been adding, Sarge? To Palantir PLTR, to Rocket Lab USA RKLB, to BlackSky Technology BKSY and, yes, to SoFi Technologies. Let's explore.
On Wednesday...
The St. Louis-based 8th U.S. Circuit Court of Appeals found in favor of seven states that sued to stop the U.S. Education Department (under the Biden administration) Saving on a Valuable Education (SAVE) program. The court found the Department of Education had exceeded its authority by trying to use the Higher Education Act to increase student forgiveness at the expense of U.S. taxpayers.
This should be a positive for a firm like SoFi Technologies, for which student loan originations and re-financings are an important business.
Last Week...
SoFi Technologies announced more than eight new benefits for users of SoFi Plus, offering members more than $1,000 in annual value.
CEO Anthony Noto said, "With the new offerings from SoFi Plus, SoFi has created America's most rewarding financial membership-one that's more than just about products and services. It's about empowering our members to realize their ambitions."
Noto then added, "SoFi Plus now delivers the strongest suite of premium benefits designed to meet our members where they are and help them get their money right. We're giving our members unmatched access to the resources they need to confidently shape their financial futures."
SoFi Plus is a $10 per month subscription service where SoFi members gain access to better interest rates, rewards and discounts. The subscription fee is waived for those members who sign up for direct deposit into a SoFi savings or checking account.
Three Weeks Ago...
SoFi reported the firm's fourth quarter financial results. For the quarter that ended with the end of the calendar year, SoFi posted an adjusted EPS of $0.05 (GAAP EPS: $0.29) on revenue of $734.125 million. Those top- and bottom-line numbers both bested Wall Street's expectations, while that revenue print was good enough for year-over-year growth of 19.3%. Fee-based revenue increased 63%, as the firm reported its fifth consecutive quarter of GAAP profitability. Net interest margin reached 5.91%, up 34 basis points from the third quarter.
Record new member additions of 785,000 for the quarter brought total membership up to more than 10.1 million (+34%), as record new product additions of 1.1 million put total product sales at more than 14.7 million (+32%). Financial Services products were up 34% while generating 90% of the firm's total growth. Lending Products were up 21%. The Technology Platform showed growth of 15%.
For the current quarter, the firm projected an adjusted revenue of $725 million to $745 mill, which was well what Wall Street had in mind. For the full year, adjusted revenue was seen at $3.2 billion to $3.275 billion, which was also well above estimates.
Danger!
Is SOFI stock developing a head-and-shoulders pattern? That would be bearish. The downside pivot is right around $14.30 if this is the case.
Or...
Has the stock simply entered into a basing period of consolidation, while remaining on trend?
Readers can see that the lower trendline of this regression model has been tested often of late as the stock has lost and regained contact with its 21-day EMA and 50-day SMA. This may just be precisely where I want to add. On that note, I have already added on Thursday.
SoFi Technologies (SOFI)
Target price: $20 (down from $23)
Pivot: 50-day SMA (currently $15.70)
Add: Down to the 200-day SMA (currently $10.40)
Panic: Loss of 200-day SMA.
At the time of publication, Guifoyle was long SOFI, PLTR, RKLB and BKSY equity.
